Technology has come a long way since Fisher & Paykel Healthcare made its first air humidifier prototype using an Agee preserving jar and the company is working hard to stay at the forefront of respiratory technology.
Since branching out from Fisher & Paykel in 2001, staff numbers for F&P Healthcare have grown to almost 3000 with shares hitting a record high of $4.90 on Tuesday, before slipping back to close at $4.60 yesterday.
The 40ha of East Tamaki land in South Auckland occupied by the business more closely resembles a town than a company, with numerous buildings surrounding a central lake and open-plan rooms, several of which are empty, attesting to expectant further growth.
In a corner of one of these expansive rooms, at a regular desk surrounded by 50 other staff, sits chief executive Mike Daniell.
Daniell has been with the company from its infancy, when the first few Fisher & Paykel research and development team members began work on respiratory devices, for what has become one of New Zealand's leading medical technology companies.
F&P Healthcare now collects 99 per cent of its $623.4 million operating revenue from overseas, and boasted yearly net profit of $97.1 million for the 2013 financial year, up by 26 per cent on the 2012 financial year.
According to Daniell, company revenue has consistently nearly doubled every five years. "Growth over the last 30 years or so has been pretty strong.
"Our revenue has been very close on 15 per cent each year, so we end up doubling our revenue every five years or so," he says.
"Fifteen years ago we had revenue of $120 million or so and now it's at $623 millon so we've definitely seen an exponential growth curve."
In the early days through the 70s and 80s
it wasn't really obvious that the humidifier
product line was really going to succeed.
Daniell, who was the Herald Business Leader of the Year in 2009, attributes a lot of the company's success to finding and focusing on niche in the respiratory sector — the company's core product line — although he notes this was not obvious initially.
"In the early days through the 70s and 80s it wasn't really obvious that the humidifier product line was really going to succeed," Daniell says.
"It was very hard going, it took about 12 years from when it started to when it got to break even, so we did look at a number of other things in case the humidifier project didn't work," he says.
"In the early 90s we realised [there was a] huge market for respiratory technology and so we began to narrow down into things that were largely related to breathing.
"That focus has definitely helped us to really grow."
More recently, F&P Healthcare has been looking into using their humidifying technology in the area of surgery, with around 20,000 surgical procedures using the technology last year alone.
Daniell says this is only the start of the millions of procedures he hopes will eventually use the company's technology.
"We've been doing this for a few years now but it's still quite early days in terms of the clinical adoption," he says. "Our experience, and the experience of many others, is that changing clinical practice, you need to be thinking in 10, 20-year time frames. But we see huge opportunities in this area."
An ageing population has created a surge in the market for the company's products, although it has also faced a number of challenges over the years, not least the strong kiwi dollar.
However, Daniell does not seem too concerned.
"For most of the last 13 years, the New Zealand dollar has been rising except in the GFC.
"So that's been an ongoing hurdle but we're pretty used to it now and I guess we're quite pleased that we believe we have responded to that and we can now do very well at these exchange rates," he says.
Daniell says revenue has nearly doubled every 5 years. Photo / Paul Estcourt
The company has largely been protected from the higher exchange rate through its hedging policy.
It also implemented a number of lean manufacturing processes and new products, as well as increasing growth in manufacturing facilities in Mexico.
Its hedging finished in March and the company will be facing a headwind of around $32 million in the coming year.
Despite this, Daniell is confident the company will still achieve a high level of profitability for the 2014 financial year.
F&P Healthcare has consistently been in the TIN100 top 10 of New Zealand biggest technology companies, and their success was also acknowledged by Health Minister Tony Ryall in his opening speech at the Healthcare Congress in Auckland last week.
"We can be proud of the achievements of New Zealand health ventures such as Fisher & Paykel Healthcare who sell their products in more than 120 countries and employ almost 3000 people, including 360 R&D staff, around the world," Ryall said.
Daniell says the company's long-term and global focus has allowed them to be where they are today.
"The decisions we make today, particularly when we have a big research and development component to the business, will really affect how well we do in five years' time," he says.
A focus Daniell believes all businesses should employ to succeed.
Breath of fresh air
• Fisher & Paykel Healthcare develops breathing devices for treatment of conditions such as sleep apnoea where patients stop breathing for periods of time when sleeping.
• The company is a world leader in heated humidification devices and ventilation technology.
• 55% of the company's devices are used in the home and 45% in hospitals.
• 99% of revenue is derived from overseas.
NZ is doing amazing things: US inventor
New Zealand's medical technology sector is tracking well, according to American health technology entrepreneur and inventor Erik Engelson.
Engelson, who was a key speaker at last week's HealthTech Innovation and Investor workshop in Auckland, says there are a number of areas where New Zealand firms are doing better in the medtech industry than their US competitors, but there are also issues where start-ups here needed to focus.
"New Zealanders are great generalists which is a good thing for start-ups but I think that companies could be pushing awareness more," Engelson says. "Yes New Zealand is a way away from the US, but companies here are doing some amazing things that should be broadcast more."
Despite this, he says New Zealand will likely become more integrated into the US medtech industry as it continues to grow locally.
"[The US] medtech industry is extremely small, so we have a lively start-up community who all communicate and are quite close," Engelson says.
"And there's no reason why New Zealand can't be part of that as well. I think that will happen as your ecosystem grows."
The trend of start-ups in New Zealand achieving profitability earlier than those in the US was also highlighted.
He attributes this to capital being more readily available in the US market.
"We have such a big market [in the US] that once we get a revenue signal, we tend to try and dump capital into it to seize the market, whereas here, that capital may or may not be available so to stay alive, it's important to get to cash flow positive early."
Engelson says that companies need to promote themselves and push their brands to America.
Chris Somogyi, general manager of accelerator services at Callaghan Innovation and originally from the US, agrees with Engelson.
He says that events such as the Innovation and Investor conference were good opportunities for companies to promote themselves and network.
The workshop featured a number of start-ups pitching their ideas to investors from New Zealand, the United Kingdom and United States.